My Twitter feed is full of people crowing over the fact that the value of Bitcoin has plummeted from a recent value around $1000/coin to only $250/coin. This is wrong,. They are quoting the MtGox price, not the market price. The market price is currently around $600, the MtGox price is $250.
MtGox is one of the oldest and most popular Bitcoin trading sites. The reason the MtGox price and the market price differ is because MtGox recently shut down external trading of Bitcoins. If you've got bitcoins in a MtGox account, you cannot do anything with them, except sell them to other MtGox users (internal trading). While MtGox can't externally trade the bitcoins, they can still do money transfers in dollars, euros, yen, etc.. Customers anxious to get their money out of MtGox has caused the price to plummet, as they sell bitcoins and transfer their money out of the site.
Since the coins on MtGox are useless (at the moment), the only people buying them there are speculators -- people who hope to profit $350 per coin once trading resumes at MtGox in the next few days. The moment trading resumes, speculators can transfer all their coins to a different exchange, and cash out. Speculators plan on doubling their money, betting both that MtGox will resume external trading of bitcoins and that the market price of bitcoins doesn't plummet before then.
This $350/coin MtGox risk premium is astonishing. Normally it would mean that a substantional part of the market is betting that MtGox goes out of business and steals everyone's bitcoins. But I suspect an alternate explanation: speculators can't get money into MtGox fast enough. If I were to create an account now and transfer money, it'd be a week before the funds were available to start buying bitcoins there -- by which time they'll likely to have fixed their problem. It's something I should've planned for a long time ago.
Update: Many have pointed out that you can't really get hard currency out of MtGox as well, and that the current speculators betting there is a 58% (350/600) chance the site goes bankrupt is, if anything, unrealistically low.